US economy is heading in hard times. The number showing the slowing growth of GDP is not the worst problem. The real problem are the components which grew and which got weaker.

Between April and June, the GDP in US was growing by an annualized rate of just 2.4%. This growth did not meet the expectations of economists who thought, that the increase of GDP could reach 2,5 percent. This quarter will be the already the third in a row, when the GDP growth is getting slower- the previous quarter growth reached 3,7 percent. But none of these two facts are the real problem of US economy. The real problem are the components in the GDP which led to this number of 2,4 percent.

Namely, consumer spending, that means the most important component in US economy,   got weaker than in the quarter before. It rose by an annualized rate of just 1.6 percent, and the 3 percent growth of personal spending from the previous quarter was revised down to only 1.9 percent, too.

One of the reasons, why GDP is still on plus side is the residential investment, which climbed 28% during the second quarter. But this number will get weaker very soon, also. The reason of the recent massive growth of residential investment was the expiration of the homebuyer tax credit, which caused that people wanting to buy a house in the distinct future, did it in this quarter. However, that means also, that in this distinctive future the number of people who will buy a house in US will be substantially lower.

These trends together with the unemployment of 9,5 percent are worrying for all optimists who counted on a strong rebound. This will be not the case, for sure. US economy will be fortunate, if it will not head to a double dip recession. Pessimists are taking over.

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Photo: ISIFA